Now I can go ahead and profile the valuable customers (assuming we have converged on what “valuable” means) by describing their demographics, utilisation of the organisation’s products and services, and their interactions with the said organisation. But what the P&M folks are really asking for is whether the data can help them separate the valuable customers from the non-valuable customers. The reality is that demographics have very little separation strength; products and services utilisation is naturally correlated with value and hence is self-referencing (i.e. valuable customers will use your products more frequently). Furthermore, the profile and behaviour of valuable customers NOW tells me nothing about where to acquire more of these customers, as the current information signals are out of sync with when these customers were en route to becoming valuable. I’ve learnt that such profiling exercises are mostly not actionable as they don’t help to improve the decision-making on acquisition, cross-sell and relationship deepening.
Eric Sandosham, Ph.D.
